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This has truly been a break-through budget for the PE / VC industry. Tax pass-through for all Category I and Category II funds, and the ability to blend foreign capital in AIFs will provide significantly greater access to funds for Indian PE / VC industry.

This could propel the industry from making annual deployment of $8-9 billion to a trajectory of making 3x the current annual deployment ($25 – 30 billion) in the next 3 years.

Unlisted companies, who face the most scarcity of Capital, are the primary recipients of VC/PE equity. The 10% tax-withholding appears to be an intelligent way to comfort tax authorities (for tracking and monitoring), while providing pass-through.

While this could be an administratively smart move, its impact of capital flow from foreign investors with special tax status is to be studied.

Two budget measures that will greatly accelerate the availability of debt capital to unlisted mid-sized companies are: (1) enabling NBFCs (mid-sized) with SARFAESI Act and (2) MSME refinancing mechanism through the Mudra Bank. These measures give greater protection to the lending NBFCS, and hence enhance their ability to lend particularly at the growth stages of companies.

These changes come at a time, when India is superbly poised for sustained, high GDP growth. These measures will create a very enabling environment for entrepreneurship and growth, providing ubiquitous equity and debt capital for all capable entrepreneurs – from push-cart wallah to Flipkart!

The clarifications on permanent establishment regarding India-focused offshore fund managers in India is a good initial platform to enable offshore fund managers to operate from India. While it is a good beginning, it appears needs some work from the government to iron out the execution details before becoming a widely adopted platform.

The PE / VC industry has worked with the government for these changes for last three years. It has paid off, thanks to a government that listens and thinks big!

(Gopal Srinivasan is Chairman & Managing Director of TVS Capital. The views are his own.)